The New Policy Instruments and Approaches Collection

 A place to start your exploration 
Smart Regulation
Emphasizing prescribed outcomes and reduced burdens and flexibility
Regulation grid
Katherine Gosselin

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Smart Regulation aims to achieve public confidence in regulatory effectiveness while limiting the burden on those being regulated. Smart regulation often promotes a ‘bottom-up approach’ to regulation that offers regulated entities the flexibility to develop their own strategies to meet prescribed outcomes. It emphasized outcomes and continuous evaluation to support effective policy design and implementation. 

Smart regulation continually challenges, simplifies and improves the policy process by:

  • Identifying policy overlaps, inconsistencies, burdens, or gaps 
  • Making policy responsive to scientific and technological developments
  • Finding innovative ways to protect social and environmental benefits while fostering economic competitiveness 
  • Containing and preventing risks
  • Maintaining high standards of regulation and accountability
  • Explaining regulation in ‘plain’ or accessible language
  • Basing regulation on research, impact analyses, and scientific evidence 
  • Consulting stakeholders
  • Sharing responsibility for regulation and compliance across governments, citizens and industry. 


Advantages

  • Regulated entities can innovate to find more efficient ways to meet prescribed outcomes. 
  • Regulated entities can adopt a more holistic approach to meeting outcomes by identifying and addressing risks and root causes (as opposed to ‘Band-Aid’ solutions).
  • Government can reduce expenses by eliminating the need to monitor prescriptive steps and overlapping policies.

Limitations

  • Policy outcomes and performance indicators can be difficult to measure and evaluate if they are not well-defined, generating uncertainty as to how to foster improvements.
  • Smaller entities may not have the capacity or flexibility to innovate or develop their own strategies to meet regulatory objectives.
  • Government remains responsible for developing an effective oversight system.
  • Eliminating apparent policy overlaps without in-depth analysis could lead to gaps in protection.

Policy Opportunity

  • Can offer measures for promoting efficiency and simplification of regulatory processes in financially constrained policy environments
  • Can promote innovation in achieving regulatory objectives when standard prescriptive procedures are not achieving a desired outcome

Considerations

  • Outcomes-based regulations may not be the best option. For example, software-based platform companies may be more effectively regulated at the platform level (e.g., by examining algorithms) rather than by monitoring outcomes for each end user. 
  • It may be worth considering a combination of performance-based and prescriptive approaches.
  • Clear and well-defined policy outcomes, without regulation of prescriptive steps, may not always be sufficient.
  • The Volkswagen emissions scandal is an example of a company taking advantage of easy-to-understand environmental regulations by programming algorithms to turn on only during a regulatory test.  
  • Smart regulation is not an end, but an ongoing process of policy evaluation and improvement. 

Government of Canada

  • Transport Canada has implemented Safety Management Systems (SMSs) across various modes of transportation. SMSs are a type of smart or ‘performance-based’ regulation that allow regulated entities to tailor management systems to their own operating requirements while meeting legislated guidelines. 
  • A Cabinet Directive on Regulatory Management came into effect in 2012. It aims for federal departments and agencies to introduce regulatory reforms that adhere to smart regulation principles.
  • Environment Canada convened experts, in 2004, to review scientific findings and experiences from the Pulp and Paper Environmental Effects Monitoring Program and to improve its effectiveness and efficiency.   

Best in Class

  • From 2011-2012, the UK implemented a ‘one-in, one-out’ rule for new regulation. The UK government estimates that this process removed about £963 million in regulatory burdens to businesses. Following the success of this initiative, the government implemented a ‘one-in, two-out’ rule in July 2013.
  • Actal is the Dutch Advisory Board on Regulatory Burden, an independent and external body that advises government and Parliament on how to minimize regulatory burdens.

Sources